Recent weeks have been challenging for entrepreneurs. Countless founders have watched their revenue sources – their customers – shrivel up. I am completing my finance degree at Northeastern this year, as well as my time on the IDEA management team. During this time, I have been fortunate enough to spend a significant time with founders and supporters of the Northeastern and Boston entrepreneurial ecosystem, and based on those conversations, below are some tips I’ve picked up from them, about how to remain resilient during the COVID-19 crisis.
1. Find what sticks
Customers inherently churn during economic downturn; and, loss of revenue combined with continuing expenses, is what gravely impacts businesses during a recession. However, this also breeds opportunity. Customers who stay with you during a crisis are the ones who value your product the most, and can oﬀer insight into how to sell and target the audience for your product after coming out of the recession. This can help you identify the features of your product that are resonating the most with customers. Lean into them, and invest time from your product and development teams to support those customers. To do this eﬀectively, tighten feedback loops with customers. The only way to act on product input is to receive it quickly and as directly as possible. Anyone who has worked through the IDEA process will recognize the importance we place on customer interviews and surveys as a pivotal element of the “Ready Stage.”
2. Find your community
While there is some truth to the common quip that “the best businesses were built during a recessions,” I believe that peers and community are critical during a downturn, and can be a catalyst for success. At IDEA, we have a student-run team dedicated to providing the benefits of a community to our founders. First, use the collective knowledge of the community. For example, young founders are immensely nimble, but might lack knowledge around precedence. Meanwhile, seasoned founders may have experienced many nuances during their career, but might not have insight into recent technologies. Find a combination of the community to make informed decisions. Remember your teams and customers are also part of your community. Use these challenging times to strengthen your relationship with them, and make a lasting impact on your business culture.
3. Make capital decisions quickly and decisively
As Sequoia put it in, Coronavirus: The Black Swan of 2020, “Nobody ever regrets making fast and decisive adjustments to changing circumstances,” (Sequoia). Businesses survive on capital, and the levers are costs and revenue. As the graph highlights, being decisive now, enables steady recovery tomorrow, while indecision can lead to a “death spiral.”
Founders who are watching revenue shrink away need to be quick to cut costs in marketing, headcount, perks, etc., and creative in expanding runway by working closely with their financiers, services providers, and vendors. Silicon Valley Bank has been decisive with their debt customers in deferring payments up to $10M.
Similarly, excellent vendor relationships are built through tough times. As Tony Hsieh, long-time CEO of Zappos, noted in the Harvard Business Review, “Create collaborative relationships in which both parties [share] the risks, as well as the rewards.” Aligned interest is the most eﬀective way to gain flexibility around payment and terms, thus protecting cash.
4. Plan for the worst; execute on the expected
In the words of my boss and one of the smartest investors I’ve met, Rudina Seseri, Founder and Managing Partner at Glasswing Ventures, “Plan for the worst; execute on the expected” (Entrepreneur). The unpredictable is going to be frustrating, but rain or shine, a business needs to operate. Great founders can identify what they have control over and act on that. Use conservative assumptions, identify the levers you can control, and make adjustment to steer your business toward 12-18 months of runway. You can begin by pooling your expenses into columns running left-to-right of “control over,” “influence over,” and, “no control over,” and move across the sheet, quantifying potential actions, and making plans to take feasible actions. Once identifying the scale of response required, you can act decisively planning. This is the “in the trenches” part of running a business, and is crucial in the short-term during a crisis.
5. Get your head out of the trenches and look around
If you and your dependents are physically safe, use this time as a chance to be agile and steer your business. As soon as the actions “in the trenches” around protecting your team, customers, and company are made, stick your head up, look around to ascertain your standing, and get moving. Professor Scott Galloway, of New York University’s Stern School of Business, calls this action “functional speed,” described as, “the instincts to accelerate or decelerate when it mattered most” (Galloway). As competitors are startled by the all of a sudden fast-moving world, be quicker and seek and act on the opportunity that crisis breeds.
Similarly, in my Entrepreneurial Growth Strategy course at the D’Amore-Mckim School of Business, Dr. Kevin Scanlon, Professor of Practice, Entrepreneurship and Innovation, discussed the importance of an educated customer. It’s crucial that you emphasize or reemphasize the value of your product, but while other business processes slow down – such as sales or hiring – reorienting your focus toward product requires you to look beyond short-term operations. Like most things, this is easier said than done, and requires explicit eﬀort. As soon as you can get out of crisis mode, set aside a portion of your day for high-level strategic thinking that is often neglected during trying times.
As Professor Alicia Sasser Modestino, Associate Director of the Dukakis Center for Urban and Regional Policy at Northeastern said, “The sky is falling, but we might have some ways to put the pieces back together.” (News@Northeastern).
The feeling of “normal” is going to return but it’s certainly not going to look like what we thought it would in February. For the Northeastern founder and venture community, IDEA is here to support that transition into a new world. If you are interested in joining as a venture, get started by attending a New Venture Information Session, and if you want to support Northeastern founders, please reach out!
Kyle Dolce is a rising senior studying finance at Northeastern, and the venture director for IDEA, Northeastern’s venture accelerator. He is currently completing his last co-op at Inrupt, a startup founded by Tim Berners-Lee, the creator of the world wide web, and will return to Glasswing Ventures for the summer as an investment analyst.